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DIFC Courts and Smart Dubai to launch world’s first “Court of the Blockchain”

The Dubai Government intends to run 100 per cent of applicable government transactions on blockchain by 2020. As part of this strategy, the Dubai International Financial Centre Courts and Smart Dubai, a government initiative, are working together on a new “Court of the Blockchain”. This taskforce is intended to be the first step in “creating a blockchain-powered future for the judiciary” of the DIFC.

Remit of the taskforce

The joint taskforce will explore how to enable more efficient resolution of disputes relating to smart contracts. Its preliminary work will be to explore activation of cross-border enforcement of legal judgments through the blockchain. Future research will focus on building dispute resolution mechanisms into the smart contract code.

A central aim is to explore how smart contracts between businesses can be executed using blockchain, with regulation and contractual terms encoded within the smart contract. The joint taskforce intends to model smart contracts across the blockchain incorporating logic to allow for various forms of exceptions and conditions with the aim of supporting more seamless and efficient dispute resolution process in the DIFC.

Blockchain and smart contracts

Distributed ledger technology – such as blockchain – provides a platform on which smart contracts may be hosted. A smart contract can be defined as a contract whose terms have been reduced in whole or in part to computer code and which is capable of self-executing (in part or in full) on the occurrence of pre-defined triggers.

Smart contracts offer the promise of greater speed, cost efficiency, enhanced trust and fluidity of transactions with reduction of ambiguity in contracts. However, the automated nature of smart contracts and the technology which hosts them raise novel dispute resolution issues for lawyers and legal bodies to address. Generally smart contracts remain untested in the courts.

Dispute resolution issues specific to blockchain

Determining which law applies to a blockchain transaction and the relevant jurisdiction in which to resolve any disputes can be a challenge. There may also be issues around conflict of laws in a cross-border context and enforcing a judgment or award in respect of a digital asset. Also, blockchain-based smart contract transactions are considered to be irrevocable and there is no straightforward technical means to unwind a transaction. The self-executing nature of a smart contract also makes it difficult to provide for discretion on whether to exercise a clause. Getting code to respond to real-life events (such as force majeure) is also challenging.

Disputes could also arise around a host of legal technical questions related to smart contracts that still need to be answered. For example:

how to ensure a smart contract is properly entered into and executed

how a smart contract could be amended or terminated

how confidentiality can be ensured

how security could be granted over assets via a smart contract.

Dubai’s focus on legaltech

Dubai has an ambitious agenda to become a world leader in legaltech and judicial innovation:

“This taskforce is in line with our guiding principle to deliver courts as a service, powered by technology and extended through cooperation agreements and alliances. By harnessing blockchain technology, Dubai will be firmly positioned at the forefront of legaltech and judicial innovation, setting the standards for countries and judiciaries to follow.”